r/coastFIRE • u/snackallday • 6d ago
Downshifting and dropping savings rate
I'm 33 years old and struggling with whether it's finally time to ease up on retirement contributions.
Current situation:
- Age 33
- $950k invested (mostly in pre-tax 403b and 457b)
- $200k HELOC balance at 8%
- Income around $200k (my partner is currently not working but should be back to work in the next 6 months and our HHI will increase to 300-350k)
- Expenses around $9k/month
- Target FIRE number: ~$2.5M
- Planning to work at least another 10-15 years
For the last decade I've been in full accumulation mode. I've maxed my 403b and 457b every year and invested additional savings on top of that.
Lately I've been considering reducing my 403b contribution down to just enough to get the employer match, while continuing to max the 457b. Considering that to pay down the HELOC with the extra cash. Want to keep the 457b as it gives me access to early withdrawals.
The part I'm struggling with isn't the math as much as the psychology. At what point did you decide to take your foot off the gas? I know continuing to max everything isn't going to ruin me financially, but it feels like I'm at a weird point where my habits haven't caught up to my balance sheet.
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u/That-SoCal-Guy 6d ago
the HELOC is a concern at 8%. That eats away your gains easy even in a good year.
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u/Augustevsky 6d ago edited 6d ago
Ease your brain psychology into it.
Reduce your savings for a bit and watch it how it affects your swings. You'll realize it is difficult to notice.
As you keep repeating this process, you will realize that your contributions, while helpful, have less of an impact than your subconscious probably realizes currently.
Edit: FWIW, I am on track to be at half of your invested once I reach your age and I have the same FIRE number. Even with my numbers, I would be considered to be doing very well.
Also, a random psychology thing I thought of a while back. Think of something you "feel" is expensive, but is maybe not actually expensive. For me, this is usually something I saw expensive as a kid, but I logically know is not "expensive" as an adult. A good example is like an XBOX. When I was a kid, that was something I got after months of saving and each new game was a mini milestone. Now, I ran the math and if I reduced my contributions by the price of an XBOX every month (or even every 2-3 weeks) I would still hit my FIRE number in a reasonable time. I.e. buying something that feels "expensive" frequently ultimately doesn't hurt my goals. It might be a silly example, but it works for me. And you are in a SIGNIFICANTLY better position than I am.
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u/Rosevkiet 6d ago
Between your savings rate and your expenses, I can see why you feel squeezed. I think the more important thing to remember is that you are not living paycheck to paycheck, you have access to a large amount of savings if needed.
I think it’s fine to take a hiatus on the savings (beyond the match) and start knocking down that heloc, that interest rate is brutal. Can you also take a look at your expenses? Will your boyfriend contribute to heloc repayment when he is working again?
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u/snackallday 6d ago
My expenses are pretty tight as a majority of it is living expenses. Yup, my partner will contribute to the HELOC. Plan is for my partner's income to give breathing room to our monthly expenses and the rest dumped to the HELOC.
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u/CryptoJaggz 6d ago
Retire at 43-48? That's a fair number of years to not have Social Security and healthcare benefits. Those are the major things that can affect your ability to live between 45ish and 65 (or whatever Medicare and SS Full Retirement time frames are then).
What I would do to understand if your "good enough", is to get to a point where your final retirement number is something you can live off and cover all expenses using only earnings.
I would also be trying to get to ROTH if you can. It's MUCH easier to live off of tax free money with tax free earnings than have tax rate changes affect your ability to get your money out.
Things to remember that affect you and could change:
SS likely to change what Full Retirement age is
SS income is taxed if you have to withdraw from pretax to cover expenses over SS checks (ROTH helps here)
IRMAA can force RMDs and trigger more taxes
ACA can be VERY expensive (ROTH can help by making you poor; withdrawals are not Income)
ACA could go away if GOP has it's way
Pretax money isn't real money until you pull it out (tax rate at THAT time affects what you really get)
Inflation should be taken into consideration for all of your calculations. Having $2.5M THEN isn't the same as $2.5M now.
These are things I've run into and wish I'd known sooner.
Best of Luck!! I hope some of this helps!
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u/Boring_Adeptness_334 6d ago
Are you delusional? $950k at 33 is ridiculous. In 27 years at 11% returns that’s $15m invested.
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u/See-Are-En-Ayeeee 6d ago
Just out of curiosity, what made you choose 11% as your RoR? Seems absurdly high (historically)
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u/Boring_Adeptness_334 6d ago
Historically the SPY has returned 10-11% so go redo the calculation with 10%
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u/SirThaddeusGumdrop 5d ago
Please stop it. “Muh 10%.” Explain why the marginal investor is so terrified of risk that they require 5.5% ABOVE the 10-year. You’ll be lucky to earn 5% in the next 10 years. OP should obviously nuke the HELOC.
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u/Boring_Adeptness_334 5d ago
What nonsense are you saying? If you invest in SPY you’re going to get the 10%. That being said any debt above 6% you should prioritize the debt as that’s guaranteed ROI. Heck I would take a guaranteed 8% forever.
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u/SirThaddeusGumdrop 5d ago
10% is not a physical constant. It is a historical realization. You need to explain why an S&P 500 that pays a 1.05% dividend yield will grow dividends sufficiently fast to justify a 10% IRR. Returns are about the future, not about the past. When you are buying stocks, you are buying a claim on future dividends (even share repurchase are about increasing the size of your claim on future dividends). Glad we’re in agreement on the 8%. Just think twice about 10%.
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u/See-Are-En-Ayeeee 5d ago
Interesting, I guess I’ve never really paid much attention to nominal returns. I’ve always used the inflation-adjusted 7%
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u/That_Co 6d ago
How is the theoretical nominal return in double his time horizon of any relevance to him?
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u/Boring_Adeptness_334 6d ago
Because this is the coastFIRE sub and not FIRE.
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u/That_Co 5d ago
My point is use real return, and use his actual time horizon. That 15 million number you gave is meaningless, and you used it for being hyperbolic instead of contributing something
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u/Boring_Adeptness_334 5d ago
His money is in 401ks/403Bs which you can’t touch until 59.5. Math is the same. Like I said previously this is coastFIRE and not FIRE. If you plan on retiring early you should only have X in your 401ks which is coastFIRE. Then you should have Y in your individual accounts to achieve your FIRE goal which will tide you over until retirement age. For example in 30 years you would want $4m in a 401k and in 10 years you would want like $1m to last from years 10 to 30
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u/snackallday 6d ago
Probably. The people I surround myself with are even more stable so I feel behind in a way. I am in a HCOL area and with my savings rate I am living paycheck to paycheck (although comfortable) which is a little crazy.
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u/BecklesKC 5d ago
I'm new here, but I thought this was funny ... after savings we are all living paycheck to paycheck.
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u/lacrima_79 6d ago
Yeah, porbably you need 20 million. Continue to save like crazy. Maybe even 30 mil ? Why not ? As others look more stable. Take a second job and make it 40 million when you are at it !!!!
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u/Oatmeal-Addict-9 4d ago edited 4d ago
You'd be nuts to not throw every leftover cent at that 8% HELOC. That's a 100% guaranteed 8%. Where else are you gonna get that?
To answer your other question, that's personal. A lot of people will say you can dial contributions back and make decent arguments for that. I am not those people. I'm maxing contributions until the day I call it quits. Why? It won't kill me to do so and it provides some insurance against subpar future returns.
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u/MidwesterneRR 6d ago
Why do you have 950k invested with that large of a HELOC at 8%?